Digital Ad Revenue Passes Broadcast TV Ad Revenue Amid Mobile Surge

Internet ad revenue exceeded ad revenue from broadcast TV for the first time, according to the IAB’s annual Internet Ad Revenue Report. Online ad spend rose to $42.8 billion in 2013, up 17% from 2012. Broadcast revenue was a close second, at $40.1 billion.

Mobile advertising, which for a third year in a row grew three-fold (2013 mobile ad revenue increased to $7.1 billion, up from $3.4 billion in 2012), accounted for much of this growth.

“In the US over the last five years, mobile is the only media sector that’s growing and it’s growing wildly fast,” said Chris Fralic, a partner at venture capitalist firm First Round Capital. “It caught up with online. The only thing chasing is TV. TV and everything else is dropping in terms of time spent. That’s a safe trend to bet on.”

Not that this indicates the beginning of the end for broadcast TV advertising. Pete Stein, Global CEO of Razorfish, disagrees that TV viewership is on the wane. “Average TV viewing time is actually up,” he said. “The difference is increased fragmentation with simultaneous consumption across multiple devices – TV, iPad, mobile.”

Baba Shetty, chief strategy and media officer at DigitasLBi, also sees continued revenue growth across digital channels – due to the cross-channel consumption Stein identified – as well as broadcast TV. “We've had one of our strongest years yet for growth in our media business,” he said. “Digital ad spend is strong (as the IAB reports) but data-driven cross-channel in particular has been a big driver for us. TV buying is strong as well.”

The top three verticals driving this growth, according to the IAB, include retail (21% of ad revenues) financial services (13%) and automotive (12%).

But is this growth, particularly the three-year explosion in mobile, sustainable?

For Greg Coleman, president of global technology company Criteo, the narrative should focus less on mobile as a standalone channel. In two years, he said, the conversation will center around reach. “Our clients increasingly want an integrated solution and need to reach their most profitable customers wherever they are – regardless of the platform,” he said. That being said, he predicted mobile’s growth won’t stop as it “continues to become an inherent part of effectively reaching, engaging and converting consumers.”

Razorfish’s Stein said mobile’s growth comes from its relatively small base and, over the next three to five years, as that base grows, the growth curve will flatten, “unless there is a breakthrough in cross-device optimization via fingerprinting technology.” This hope echoes Coleman’s anticipation that mobile will become less standalone and more integrated.

But Stein issued words of caution: “One has to be wary and cognizant of the privacy issues.”